Dead Ahead: Big Black-Swan Events!

Tomorrow at noon Eastern Time, I will meet you online to give you an urgent video briefing. (To join, click here a few minutes before the hour.)

And I feel it couldn’t be a better time. Because, right now …

A subtle, but fundamental, shift — not yet widely discussed in financial circles — is sweeping the globe, with enormous potential consequences for the U.S. economy, for investors and for you personally:

The old global war on splintered terrorist cellsand ragtag militias is turning into a global war
against fully armed, well–organized armies.

This is happening in all three theaters of war that are currently at the top of the news — in Iraq and Syria, in the region surrounding Israel, and in Ukraine.

It’s causing a rapid, tectonic shift in strategy-making at the Pentagon, in the White House and in Congress.

It could cast a long shadow on nearly everything that Washington does to the U.S. economy — warping the federal budget … prodding still more Fed money printing … and creating all kinds of new excuses to pursue reckless, unsound policies.

And it’s likely to trigger a series of black-swan events — powerful, unpredictable changes that strike like a comet from distant space.

So, first, let me demonstrate for you the enormity of this change. Then, I’ll explain the economic and investment consequences.

Iraq and Syria: ISIS is Already a Full-Fledged Army

ISIS used to be viewed as just another al-Qaeda affiliate among the dozens of groups that have sprouted up like wildfire across Africa and Asia — all competing for recruits, few coordinating their activities.

Today, after months of prescient warnings that fell on deaf ears, that idea is finally being recognized for what it was: naïve and dangerous.

According to the New York Times, “ISIS’s success has alarmed American and regional security officials, who say it fights more like an army than most insurgent groups, holding territory and coordinating operations across large areas [with] a network of regional commanders who have their own subordinates and a degree of autonomy.”

Photo of purported ISIS leader Abu Bakr al-Baghdadi.

The leadership structure, explains the Times, includes 25 deputies across Iraq and Syria, among which about one-third were military officers during the rule of Sadam Hussein, and nearly all were at one time imprisoned by American forces.

Behind this are the recent successes of an ISIS campaign to free hundreds of militants from Iraqi prisons, including intelligence officers and soldiers that had been leaders of Sadam’s elite Republican Guard. Moreover, many are graduates from Sadam’s military academies and are highly skilled strategists with years of experience fighting U.S. forces.

Now, with its control of large populated areas, ISIS is likely leveraging this experience to recruit and train tens of thousands of unemployed, disaffected youth. At the same time, for the global recruitment of jihadists, ISIS has turned mostly to foreigners, including Saudis and Westerners with advanced media and propaganda skills.

Result: Both locally in the region and internationally across four continents, ISIS is like a jolt of electric-magnetic energy that’s transforming a messy, disjointed terrorist field into an aligned, singularly focused, global terrorist army. Now, mostly in Syria and Iraq; soon, also in Africa, Europe, North America and Asia.

But this isn’t the first time a terrorist organization has evolved into an army …

Lebanon and Syria: Before ISIS, Hezbollah
was the Largest Terrorist Army in the World

Hezbollah leader Nasrallah.

According to The Tower Magazine, a reliable source on Israel and the Middle East, before ISIS burst onto the scene, it was Hezbollah that was “probably the world’s largest, most sophisticated, wealthiest and most militarily capable terror organization.” They explain how …

Hezbollah, a Shiite organization, was created, trained, funded and deployed as a proxy of the Iranian government, with operations spanning Europe, Africa, Asia, and the Americas.

It has effectively taken over the Lebanese government.

It has launched thousands of rockets at Israeli civilians.

It has killed more Americans than any other organization other than al-Qaeda.

And it is a fearsome weapon in the jihadist anti-Western arsenal.

The only saving grace: It’s vehemently opposed to the Sunni ISIS; and in the Syrian civil war, thousands of its fighters have been directly confronting ISIS armies on the battlefield.

Ukraine: Rebel Militias Replaced by Russian Army

Until just a few days ago, the Western-backed Ukrainian army was on the verge of defeating Russian-backed militias seeking to establish a break-away region aligned with Moscow.

And even if Ukraine’s central government could not achieve victory, NATO and Russian forces always were two steps removed from a direct confrontation. Both were fighting a proxy war; neither involved in direct conflict.

Now, suddenly that has changed.

Now, the Western-backed Ukrainian troops are no longer making steady advances against inexperienced, oft-disorganized and extremely discouraged, local militias; they are retreating in panic from the vanguard of one of the largest, best-organized invading forces on the planet: the Russian army.

It seems, in fact, that Russian President Putin’s strategy is to escalate its penetration into Ukraine in three phases:

Phase 1 was his so-called “humanitarian convoy” that defied the International Red Cross and crossed the border into Ukraine without IRC inspection or escort two weeks ago.

Phase 2 is Russia’s stealth invasion, now under way, using unmarked armament and troops. Despite Mr. Putin’s repeated denials, evidence is now virtually conclusive that his army has crossed into Ukraine and reached the battlefields on two separate fronts.

And it looks like Phase 3 will begin soon after he publicly admits the presence of his troops — an admission that I believe will presage an unabashed, all-out invasion by the Russian armed forces.

How big is the Russian military? Nominally speaking, it’s estimated to have 766,000 active personnel, about one-half as many as the U.S. But it also has 2.5 million reservists, three times as many as the U.S.

Meanwhile, Russia’s total tank strength is massive — over 15,000 units or nearly double America’s. And its self-propelled guns (SPGs) number close to 6,000, also triple the U.S. arsenal. Both these tanks and SPGs could be critical on the Ukrainian battlefield.

I’m not implying that the U.S. or NATO will confront Russia on an Eastern European battlefield. NATO commanders have effectively vowed not to do so unless Russia invades a NATO-member nation, such as those with large Russian-speaking minorities, like Estonia, Latvia and Lithuania.

Rather, my points are twofold:

First, Russia has tremendous military resources to spare. It could easily and quickly overwhelm the Western-backed Ukrainian army with just a small fraction of its forces. Moreover, given the West’s implicit vow not to respond militarily, it could do so with almost total impunity.

Second, the only way Western Europe and the U.S. can or will retaliate is via sanctions on Russia. But unlike any previous sanctions, they will not be constrained or contained. Nor will Russia’s response. For the first time, Western Europe and the U.S. will hit hard with actions that cripple Russian industry, gut their stock market, and set off a far more dangerous round of tit-for-tat East-West economic warfare.

Don’t Underestimate the Economic
and Investment Consequences!

That’s the mistake most analysts and investors have already made — repeatedly. But you can be different. You can step back from the trees of day-to-day trading and see what many experts have been largely ignoring, what has been obvious to Larry Edelson and our Money and Markets team for many months:

Consequence #1. The movement of flight capital to the United States is large and accelerating. The main reasons: Despite all of our internal troubles and fumbles, the United States …

* Still sits at the pinnacle of all military forces in the world, with no peer in terms of advanced weaponry, warships and air power.

* Still boasts the largest economy in the world.

* Still has the strongest alliances with the largest number of countries.

* Already has new drilling technologies to achieve the long-sought goal of energy independence.

If we slide further down our current fiscal and monetary path, could this change? Absolutely. But right now, the U.S. continues to be the single most secure and dominant economic/military power on the planet; and that helps explain why flight capital from all over the world continues to flow into the U.S.

Not just from frightened families in the Arab world, as I illustrated here last week, but also from …

* Major banks and other financial institutions still heavily invested in North Africa, the Middle East, Pakistan and other hot spots.

* Russian oligarchs, who have already moved a good portion of their big cash hoards out of Russian banks, and are now taking the rest …

* Japanese pension funds and institutions, who had invested heavily overseas in recent years, and are now shifting from what they consider “hot zones” (like the Persian Gulf and North Africa) to what they deem “safe zones” like the U.S. and Japan itself.

* Massive sovereign wealth funds that are so large, even small moves can have a big market impact. I’m talking about Norway’s Government Pension Fund (with $893 billion in assets), UAE’s Abu Dhabi Investment Authority ($773 billion), Saudi Arabia’s SAMA Foreign Holdings ($738 billion), and China’s three largest sovereign funds (over $1.5 trillion), just to name the largest.

* Plus many other sources of flight capital, some hidden or some not.

This helps explain why the U.S. stock market has been going up and could continue to do so.

It also helps explain why U.S. real estate, especially in key markets, is recovering.

Consequence #2. Escalating economic warfare with Russia; a closer alliance between Russia and China; and bigger efforts by both to draw unaligned developing nations into their fold.

Consequence #3. Big new strains on the shaky U.S. federal budget: In Eastern Europe, NATO members are already pleading for — and about to get — more NATO forces. In Washington, the Pentagon is already pushing for money to finance a stronger U.S. military presence globally. And all over the U.S., Americans, who, just weeks ago, were still demanding cutbacks in military spending, are now pleading for big increases.

Consequence #4. More Fed funny money, or worse! If the U.S. is waging all-out economic warfare with Russia and China … if the U.S. budget deficit is going haywire again … and if all this begins to look like a new black cloud hovering over the U.S. economy …

The Federal Reserve is not going to stand idly by. It will do everything in its authority — or even outside its authority — to offset the real or imagined impacts on the financial markets, the job market, the real estate market and more.

What exactly will the Fed do? Too soon to say. But at the very minimum, it could use these new threats to the economy as another in a long line of excuses to delay what it should have done long ago — sopping up some of the $4 trillion in stimulants that it has injected into the economy bloodstream since 2008.

And this is just the beginning! If military and economic warfare continue to escalate globally, there’s no crystal ball that can divine the ultimate consequences. That’s why this environment is so prone to black-swan events.

My recommendations:

1. Tomorrow, just before noon Eastern Time, click here to attend my special online video briefing.

2. Continue to seize the opportunity to profit from the select investments we’ve been pointing you to — in sectors like domestic energy and technology.

3. Keep core, long-term positions in cash and gold — not only to protect yourself against financial threats, but also to help cushion against the inevitable black swans.

Good luck and God bless!

Martin

Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recesssion and Depression.

{18 comments }

Trader HermesMonday, September 1, 2014 at 9:41 am

Great Guess work.
Article has a good summary of what logically will happen. Timing of the market. Zero like all of us.
Where is Klaus When you need him – Calls the Tops Calls the Bottom – Goes on Holiday for 5 years.

Linda GrahamMonday, September 1, 2014 at 10:06 am

“Despite Mr. Putin’s repeated denials, evidence is now virtually conclusive that his army has crossed into Ukraine and reached the battlefields on two separate fronts.”

Not hardly. You are falling for Poroshenko’s wholly unverified claims. OSCE observers on the Russian border report NO movement of Russian troops into Ukraine. Nada. This is supported by our own CIA and by the Rebel troops themselves. Poroshenko refuses to admit that his army is being routed by a group of farmers and miners. But many of those “rebels” fought in their early years in Afghanistan and have military training. There are 1000 volunteers from Russia and several hundred from France. But no Russian troops. Believe the rebels – if Russians were in Ukraine, this civil war would have been over in a few days if not hours. I could link you to several real time sources of information that is not politicized but your comments sections does not permit links. Please ask yourself what you would do if government troops showed up in your town, murdered senior citizens, called you “an animal” and shelled your house. Would you try to defend yourself? The citizens of Donetsk did not start the fighting. They were attacked. And why? As the thugs in Kiev have announced, they must all be “exterminated” so that Chevron can frack the natural gas reserves under their houses.That is the objective. honestly. I am ashamed for the US that it is involved in this atrocity at all.

Rain CoastMonday, September 1, 2014 at 12:42 pm

Well said Linda. It has been shown over and over, throughout history, that when the economy of an empire starts to die and cause societal upheaval, the powers that be manufacture an enemy and take the nation to war. What better distraction for the unhappy/spoiled populace than that?

The oligarchy/financially controlled, so-called “elected” leadership wants another “bigger and better” war badly. Their plan to go into Syria was shot down, as was all the build up to “action” in Iran. Now its the Ukraine’s turn. Only Putin and “Mother” Russia have something to say about that!

One must remember that the world suffered 55 – 60 million dead during the second World War and conservatively, 20 million of those deaths was suffered by Russia. So who REALLY won the second world war? The Russian spirit of sacrifice and tenacity has not diminished since then. If anything, what they have endured would have ‘broken’ any soft, spoiled, pampered, western society long before now.

Me thinks the hubristic, self-serving, corrupt, present military/industrial leadership in DC has bitten off more than they can chew!

DrRGPSunday, September 7, 2014 at 6:20 pm

“Not hardly”?

JimMonday, September 1, 2014 at 10:46 am

Well done Linda ,I entirely agree.Paul Craig Roberts has a press conference video on his website with the so called rebel leader that says it all

jonMonday, September 1, 2014 at 1:00 pm

u guys live on conspiracy theorist.. u try to scare people to think they need ur “awesome advice” TO SURVIVE UPCOMING APOCOLYPSES.. show ur returns vs the s&p since 2009 guarantee real wealth didnt beat the s&p once in 5 yrs

someTuesday, September 2, 2014 at 9:10 am

exactly. They’ve done this multiple times a years since I came across this site- back in 2008. Would love to see the results – which they don’t publish.

Joe DoaksMonday, September 1, 2014 at 2:06 pm

I must agree with
LINDA . …

a. witterMonday, September 1, 2014 at 2:32 pm

It is absolutely astounding that you make no mention of the usa’s responsibility in all this war & chaos. We create terrorists, we arm these terrorists, we negotiate w/these terrorist – we bomb countires like it’s no big deal – we commit war crimes & then point the finger at other nations – we have more oligarchs than russia could ever dream of – we have more despots too. We create & enable humanitarian crises, we look the other way & even fund war crimes… it’s truly despicable. The buly & policeman of the world – we keep creating enemies…we are the biggest enemy of peace.
Our so-called war on terror – has made us the terrorist.
then there’s this: http://www.democracynow.org/2014/9/1/a_slaughter_of_innocents_henry_siegman

Linda GrahamMonday, September 1, 2014 at 4:00 pm

The “indispensable” and “exceptional” America now has the distinction of being deemed by a recent international Gallop poll as the “greatest threat to world peace” by a majority of the world’s population and by Princeton/ Northwestern studies as neither a republic nor a democracy but an oligarchy. Our indispensable oligarchs are no doubt grateful to the central banks for increasing their wealth by buying US futures and cranking up forever the indispensable US stock market. This new war against Russia and China that they all seem to crave will not make them or any of us here any richer because there is a high probability that we – and the planet – will not survive it.

Roger WeeSaturday, September 6, 2014 at 11:27 am

You are right ! Linda. America does not fear BRICS but FEAR Russia & China command on the economy. They currently had signed more than 40 countries to trade directly, bypassing the US Dollars and in their own currency. More countries are moving towards BRICS because they have been bullied for very long time. It should be interesting to see the outcome of the European market in a couple of months time. I believe 2014 will be the starting of a harsh road ahead for Europe.

Doug TolanMonday, September 1, 2014 at 7:07 pm

LOL Linda. You’re ashamed that the US isn’t involved in this atrocity? As if the US is able to afford another war… We’ve spent over 5 trillion in the middle east thus far, and for what? And you say we need to now be there too?? WOW! You realize the only way we can even afford our current wars is by stealing from the lower and middle class (through diluting our currency)? What a joke.

RobertMonday, September 1, 2014 at 7:23 pm

Doug. If I am reading Linda right, “…I am ashamed for the US that it is involved in this atrocity at all.” I believe she is saying the US should NOT be involved in this at all…

Linda GrahamMonday, September 1, 2014 at 9:31 pm

Mr. Tolan – The US financed and sponsored the coup in Kiev. That coup put in power neo-nazi thugs who seem to hate both Russians and Jews and have been enjoying a killing spree in eastern Ukraine. The US is already involved – and that is despicable. Making money off this wanton immoral destruction by ‘buying the right stocks’ is not something I am interested in. And yes, Robert is correct. You misread my post.

HowardWednesday, September 3, 2014 at 12:38 am

It just amazes me that some still believe that a hand full of terrorists caused the disaster on 9/11, without any knowledge of, preparedness by or assistence from anyone else. But then I could just be conspiracy theorist.

PeterSaturday, September 6, 2014 at 9:25 pm

Is it by coincidence or design that these events are shaping up? The Ukraine/Russian conflict is, I believe, particularly relevant from various perspectives: If I recall correctly the Ukrainians were only too glad to be rid of the Russians following the wall coming down back in the late ’80s.
It would appear Putin is now prepared to advance his “Russian Empire” dreams regardless of cost and in the face of seemingly toothless western alliances.
Perhaps the most notable idea in all of this is of Russia as scapegoat, in a sense, in light of the prior sentence. QE1 through …… has placed an insurmountable burden on the USA. That debt cannot be repaid. So what is the most obvious solution, one that will also ramp up the real economy, create jobs etc. etc.? War. It has worked well for many nations in recent history. And as you point out in your article above, whilst Russian has a large and capable ground attack force, when it comes to outright military might the USA still rules the roost. Further, with Russian and Chinese alliances strengthening we now have a circumspect method for attempting to enforce China’s position in terms of global clout.

China, however, is not to be underestimated, and they are feeling their mettle. Not only do they have the sheer numbers, they are pouring ever larger resources into developing their own military machine, land sea and air, and have recently tested equipment well beyond the most advanced capabilities of anything currently available in Europe, Russia, or the USA. (WU-14).
Of course, all of this sabre rattling, as it now stands, is really quite pathetic. Control at what price? And over what? Would not all these capital and human resources be better deployed for the betterment of mankind, rather than its destruction?

We can only hope a fly soon lands in their collective ointment.

shankarSunday, September 7, 2014 at 7:29 am

It is one sided, just supporting America only. America can air strike in Iraq on humanitarian grounds, but Russia can not send any humanitarian supplies to starving civilians. When trucks waited for more than a week, why no one bothered. Media can not manage everything, just propagating the same over and over also does not make any value. When finally they crossed the border, please note nothing happened. Hope both parties come for a peaceful agreement and reduce hardships for the normal citizens.

William ReaderMonday, September 8, 2014 at 8:40 pm

I ….. like possibly many others
CANNOT view your Videos!
But IF given a choice,
I would certainly read the transcripts.
Thank you.